Question 1

A bond is a written promise to pay an amount identified as the par value of the bond along with interest.

Accepted Answer

A) True 
 B)False

Question 2

A discount on bonds payable:

Accepted Answer

A) Occurs when a company issues bonds with a contract rate less than the market rate. 
B) Occurs when a company issues bonds with a contract rate more than the market rate. 
C) Increases the Bond Payable account. 
D) Decreases the total bond interest expense. 
E) Is not allowed in many states to protect creditors. 
A) Occurs when a company issues bonds with a contract rate less than the market rate. 
B) Occurs when a company issues bonds with a contract rate more than the market rate. 
C) Increases the Bond Payable account. 
D) Decreases the total bond interest expense. 
E) Is not allowed in many states to protect creditors.

Question 3

A company has bonds outstanding with a par value of $100,000.The unamortized premium on these bonds is $2,700.If the company retired these bonds at a call price of 99,the gain or loss on this retirement is:

Accepted Answer

A) $ 1,000 gain. 
B) $ 1,000 loss. 
C) $ 2,700 loss. 
D) $ 2,700 gain. 
E) $ 3,700 gain. 
A) $ 1,000 gain. 
B) $ 1,000 loss. 
C) $ 2,700 loss. 
D) $ 2,700 gain. 
E) $ 3,700 gain.

Question 4

On January 1,a company issues bonds dated January 1 with a par value of $400,000.The bonds mature in 5 years.The contract rate is 7%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $383,793.The journal entry to record the issuance of the bond is:

Accepted Answer

A) Debit Cash $400,000; debit Discount on Bonds Payable $16,207; credit Bonds Payable $416,207. 
B) Debit Cash $383,793; debit Discount on Bonds Payable $16,207; credit Bonds Payable $400,000. 
C) Debit Bonds Payable $400,000; debit Interest Expense $16,207; credit Cash $416,207. 
D) Debit Cash $383,793; debit Premium on Bonds Payable $16,207; credit Bonds Payable $400,000. 
E) Debit Cash $383,793; credit Bonds Payable $383,793. 
A) Debit Cash $400,000; debit Discount on Bonds Payable $16,207; credit Bonds Payable $416,207. 
B) Debit Cash $383,793; debit Discount on Bonds Payable $16,207; credit Bonds Payable $400,000. 
C) Debit Bonds Payable $400,000; debit Interest Expense $16,207; credit Cash $416,207. 
D) Debit Cash $383,793; debit Premium on Bonds Payable $16,207; credit Bonds Payable $400,000. 
E) Debit Cash $383,793; credit Bonds Payable $383,793.

Question 5

A company calls $150,000 par value of bonds with a carrying value of $147,950.The company calls the bonds at $151,000.Prepare the journal entry to record the retirement of the bonds.

Accepted Answer

The answer of A company calls $150,000 par value of...

Question 6

On January 1,a company issued 10-year,10% bonds payable with a par value of $500,000,and received $442,647 in cash proceeds.The market rate of interest at the date of issuance was 12%.The bonds pay interest semiannually on July 1 and January 1.The issuer uses the straight-line method for amortization.Prepare the issuer's journal entry to record the first semiannual interest payment on July 1.

Accepted Answer

@#IMG-DLM& Cash payment: $500,000 * 10%

Question 7

Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are:

Accepted Answer

A) Debentures. 
B) Discounted notes. 
C) Installment notes. 
D) Indentures. 
E) Investment notes. 
A) Debentures. 
B) Discounted notes. 
C) Installment notes. 
D) Indentures. 
E) Investment notes.

Question 8

A company issued 10%,10-year bonds with a par value of $1,000,000 on January 1,at a selling price of $885,295,to yield the buyers a 12% return.The company uses the effective interest amortization method.Interest is paid semiannually each June 30 and December 31.
(1)Prepare an amortization table for the first two payment periods using the format shown below:
   (2)Prepare the journal entry to record the first semiannual interest payment.

Accepted Answer

(1)
 @#IMG-DLM& 6/30/:
Cash payment: $1,000,000 *

Question 9

Match each of the following terms with the appropriate definitions.

-Process cost summary

Accepted Answer

A) Costing system to determine the cost of producing each job or job lot. 
B) Document that summarizes the materials a department uses during a reporting period; replaces materials requisition. 
C) Report of costs charged to a department, its equivalent units of production achieved, even the costs assigned to its output. 
D) A manufacturing system that contains features of both process and job order systems. 
E) Number of units that would be completed if all effort during a period had been applied to units that were started and finished.
F)System of assigning direct materials, direct labor, and overhead to specific processes; total costs associated with each process are then divided by the number of units passing through that process to determine cost per equivalent unit.
G)Process of products in a continuous flow of steps. 
A) Costing system to determine the cost of producing each job or job lot. 
B) Document that summarizes the materials a department uses during a reporting period; replaces materials requisition. 
C) Report of costs charged to a department, its equivalent units of production achieved, even the costs assigned to its output. 
D) A manufacturing system that contains features of both process and job order systems. 
E) Number of units that would be completed if all effort during a period had been applied to units that were started and finished.
F)System of assigning direct materials, direct labor, and overhead to specific processes; total costs associated with each process are then divided by the number of units passing through that process to determine cost per equivalent unit.
G)Process of products in a continuous flow of steps.

Question 10

Match each of the following terms with the appropriate definitions.

-Equivalent units of production

Accepted Answer

A) Costing system to determine the cost of producing each job or job lot. 
B) Document that summarizes the materials a department uses during a reporting period; replaces materials requisition. 
C) Report of costs charged to a department, its equivalent units of production achieved, even the costs assigned to its output. 
D) A manufacturing system that contains features of both process and job order systems. 
E) Number of units that would be completed if all effort during a period had been applied to units that were started and finished.
F)System of assigning direct materials, direct labor, and overhead to specific processes; total costs associated with each process are then divided by the number of units passing through that process to determine cost per equivalent unit.
G)Process of products in a continuous flow of steps. 
A) Costing system to determine the cost of producing each job or job lot. 
B) Document that summarizes the materials a department uses during a reporting period; replaces materials requisition. 
C) Report of costs charged to a department, its equivalent units of production achieved, even the costs assigned to its output. 
D) A manufacturing system that contains features of both process and job order systems. 
E) Number of units that would be completed if all effort during a period had been applied to units that were started and finished.
F)System of assigning direct materials, direct labor, and overhead to specific processes; total costs associated with each process are then divided by the number of units passing through that process to determine cost per equivalent unit.
G)Process of products in a continuous flow of steps.

Question 11

The equal total payments pattern for installment notes consists of changing amounts of interest but constant amounts of principal over the life of the note.

Accepted Answer

A) True 
 B)False

Question 12

An _______________ is a series of equal payments at equal time intervals.

Accepted Answer

The answer of An _______________ is a series of equal...

Question 13

Payments on an installment note normally include the accrued interest expense plus a portion of the amount borrowed.

Accepted Answer

A) True 
 B)False

Question 14

The carrying (book)value of a bond at the time when it is issued is always equal to its par value.

Accepted Answer

A) True 
 B)False

Question 15

_______________ bonds have specific assets of the issuing company pledged as collateral.

Accepted Answer

The answer of _______________ bonds have specific assets of the...

Question 16

When the contract rate is above the market rate,a bond sells at a discount.

Accepted Answer

A) True 
 B)False

Question 17

When the contract rate on a bond issue is less than the market rate,the bonds will generally sell at a discount.

Accepted Answer

A) True 
 B)False

Question 18

A company issued 10-year,9% bonds,with a par value of $500,000 when the market rate was 9.5%.The issuer received $484,087 in cash proceeds.Prepare the issuer's journal entry to record the bond issuance.

Accepted Answer

The answer of A company issued 10-year,9% bonds,with a par...

Question 19

Collateral agreements for a note or bond can:

Accepted Answer

A) Lower the risk in comparison with unsecured debt. 
B) Increase the risk in comparison with unsecured debt. 
C) Have no effect on risk. 
D) Reduce the issuer's assets. 
E) Increase total cost for the borrower. 
A) Lower the risk in comparison with unsecured debt. 
B) Increase the risk in comparison with unsecured debt. 
C) Have no effect on risk. 
D) Reduce the issuer's assets. 
E) Increase total cost for the borrower.

Question 20

When convertible bonds are converted to a company's stock,the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Accepted Answer

A) True 
 B)False

Exam 14: Long-Term Liabilities

A bond is a written promise to pay an amount identified as the par value of the bond along with interest.

A discount on bonds payable:

A company has bonds outstanding with a par value of $100,000.The unamortized premium on these bonds is $2,700.If the company retired these bonds at a call price of 99,the gain or loss on this retirement is:

A company calls $150,000 par value of bonds with a carrying value of $147,950.The company calls the bonds at $151,000.Prepare the journal entry to record the retirement of the bonds.

Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are:

Match each of the following terms with the appropriate definitions. -Process cost summary

Match each of the following terms with the appropriate definitions. -Equivalent units of production

The equal total payments pattern for installment notes consists of changing amounts of interest but constant amounts of principal over the life of the note.

An _______________ is a series of equal payments at equal time intervals.

Payments on an installment note normally include the accrued interest expense plus a portion of the amount borrowed.

The carrying (book)value of a bond at the time when it is issued is always equal to its par value.

_______________ bonds have specific assets of the issuing company pledged as collateral.

When the contract rate is above the market rate,a bond sells at a discount.

When the contract rate on a bond issue is less than the market rate,the bonds will generally sell at a discount.

A company issued 10-year,9% bonds,with a par value of $500,000 when the market rate was 9.5%.The issuer received $484,087 in cash proceeds.Prepare the issuer's journal entry to record the bond issuance.

Collateral agreements for a note or bond can:

When convertible bonds are converted to a company's stock,the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

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